Payroll tax on contractors in NSW: the relevant contract rules

Payroll tax on contractors applies in NSW when a business pays a contractor under a "relevant contract". Unless an exemption in section 32 of the Payroll Tax Act 2007 (NSW) applies, the payments for the work are taxed as wages, even though the contractor isn't an employee.

The rules reach further than most businesses expect, as medical centres and now Uber have found. We review contractor arrangements and act in Revenue NSW audits and objections as part of our NSW payroll tax, land tax and duty work. Section references are to the Payroll Tax Act 2007 (NSW) unless we say otherwise.

What is a relevant contract for payroll tax?

A relevant contract is a contract under which a business, during a financial year and in the course of its business, supplies to someone else, or has supplied to it, services for or in relation to the performance of work, or gives out goods to individuals to work on and supply back (s 32(1)). "Contract" includes any agreement, arrangement or undertaking, formal or informal, express or implied (s 31). Ordinary employment is excluded (s 32(2)).

If no exemption applies:

• the business is taken to be the employer, and if the contract fits both of the first two limbs, it is the business receiving the services (s 33),
• the person who does the work is taken to be the employee (s 34), and
• amounts paid or payable for or in relation to the work are taken to be wages, including super contributions and certain shares and options (s 35(1), (3)).

If a payment also covers materials or equipment, the Chief Commissioner determines the part that isn't for the work (s 35(2)). Once a deemed employer pays payroll tax on a payment, others in the chain generally aren't liable for payments for the same work (s 36). Contractor payments count towards the tax-free threshold, which grouped businesses share (see payroll tax grouping in NSW).

Labels don't decide it. Calling a worker an independent provider, a business a mere payment collection agent, or a practitioner a tenant doesn't by itself take an arrangement outside these rules (Uber Australia Pty Ltd v Chief Commissioner of State Revenue [2026] HCA 40 at [88]; Revenue NSW ruling PTA 041).

What are the payroll tax contractor exemptions?

The exemptions in s 32(2) are tested contract by contract and year by year.

Exemption	Provision	What it requires
Goods-related work	s 32(2)(a)	Work ancillary to supplying goods, or to using the contractor's own goods
Not ordinarily required	s 32(2)(b)(i)	Services the business doesn't ordinarily need, from someone who ordinarily provides them to the public generally
Under 180 days	s 32(2)(b)(ii)	Services of a kind the business ordinarily needs for less than 180 days in the year
90 days or less	s 32(2)(b)(iii)	Services for no more than 90 days in total in the year
Public generally	s 32(2)(b)(iv)	The Chief Commissioner is satisfied the contractor ordinarily provides that kind of service to the public generally that year
Two or more workers	s 32(2)(c)	The work is done by two or more people in the contractor's business
Carrying goods	s 32(2)(d)	Services solely for, or ancillary to, carrying goods in a vehicle the carrier provides

None applies if the Chief Commissioner determines the contract was entered into with an intention, direct or indirect, of avoiding or evading tax (s 32(2A)). An exemption in paragraphs (a) to (d) is also lost if the contract covers services or work of a kind that paragraph doesn't cover (s 32(2B)). Revenue NSW expects any exemption to be backed by evidence (PTA 041).

The 90-day exemption

The exemption is lost if the same contractor provides similar services to your business, or any of the people doing the work do similar work for you, for more than 90 days in total in the financial year (s 32(2)(b)(iii)). Revenue NSW counts each calendar day on which work is done as one day, however short (PTA 041).

Contractors who serve the public generally

Revenue NSW expects the business to apply for a determination before relying on this exemption (PTA 041). Supporting factors include working for several principals at once, earning income from other principals, not being tied to one business, and actively seeking work. Work for members of the same payroll tax group counts for little (PTA 021v2).

No ruling is needed if the contractor provides the same type of services to you and to at least one other principal outside your group in the financial year, and works for you on average 10 days or less per month, ignoring months with no work for you (PTA 021v2).

Contractors who use two or more workers

In Revenue NSW's view, the second person must do work required under the contract and be engaged by the contractor, not by your business. The contractor's accountant doesn't count (PTA 041).

For example, suppose a builder pays a carpenter $100,000 (excluding GST) in a year under a labour-only contract, and the carpenter works alone, on well over 90 days, almost only for that builder. No exemption is likely to apply, so the $100,000 would generally count towards the builder's taxable wages.

What did the High Court decide in the Uber payroll tax case?

On 4 November 2026 the High Court, by majority, dismissed Uber's appeal from the NSW Court of Appeal, which had held Uber liable to payroll tax for the 2015 to 2020 financial years (Uber Australia Pty Ltd v Chief Commissioner of State Revenue [2026] HCA 40 at [3]–[4], [25], [92]). Five justices (Gordon, Edelman, Gleeson, Jagot and Beech-Jones JJ) gave joint reasons, Gageler CJ concurred in separate reasons, and Steward J dissented and would have allowed the appeal (at [93], [148]). The majority held:

• Drivers supplied their services to Uber. Once a driver picked up a rider, the driver contract obliged them to take the rider to their destination, so the driving was supplied to Uber under it, even though riders also received it and drivers were described as independent providers (at [25], [62]–[72]; Gageler CJ at [6]–[10]).
• Driving wasn't "ancillary" to the use of the driver's car. The primary object of the driver contract was the driving, not the use of the car. Hiring a crane together with its operator may be different, because that contract may be primarily for the crane (at [34], [79]–[82]; Gageler CJ at [11]–[13]).
• The fares passed on were wages. The more a driver drove, the more Uber remitted (at [86]; Gageler CJ at [17]). In the joint reasons, Uber wasn't a mere payment collection agent, despite the contract's label, because it could adjust or cancel fares before paying drivers (at [88]–[91]). Gageler CJ reached the same result on the basis that Uber collecting fares as the drivers' agent didn't stop its payments to them being wages (Gageler CJ at [15]–[17]).

Steward J would have allowed the appeal. In his view the driver contract imposed no obligation on drivers to supply services to Uber: drivers carried riders under their own contracts with riders, and Uber only benefited from that. He also held that, in passing on the fares, Uber was keeping its promise to riders as the drivers' collection agent, so the payments weren't made for the drivers' work. He saw the contractor provisions as aimed at disguised employment, and said there was no suggestion of that here (at [100], [114]–[121], [132]–[136], [139]–[141]). He didn't decide the "ancillary" point (at [147]).

What does the Uber decision mean for other businesses?

The decision confirms that the contractor provisions can apply to app-based and other gig economy businesses (Gageler CJ at [2]; at [77]), and that labels in a contract don't decide the result (at [88]). But it doesn't mean every platform, or every business that uses contractors, is liable:

• It turned on Uber's contract. The majority relied on the drivers' obligation to Uber to complete each trip once it started, the standards Uber imposed on the driving and, in the joint reasons, Uber's control of the fares before it paid drivers (at [62]–[70], [88]–[90]; Gageler CJ at [9]).
• The Court decided it on the narrowest test. Services are supplied "under" a contract if the contract is the source of an obligation to supply them. The Court left open how much further the definition reaches, and said a business merely benefiting financially from someone's work isn't enough (at [60], [69], [76]; Gageler CJ at [7]–[8]).
• Only one exemption was in issue. The High Court considered the "ancillary to the use of goods" exemption, not the other exemptions in s 32(2) (at [24]).
• It is about NSW payroll tax. Workers under a relevant contract are treated as employees only for the purposes of the Payroll Tax Act (ss 33–35). The decision doesn't decide whether they are employees for other purposes, such as superannuation guarantee or workplace laws.

If your business collects customer payments and passes them on to contractors, or sets standards for how they do the work, review the arrangement and the exemptions year by year.

Payroll tax for medical practices and GPs

Medical centres can be liable for payroll tax on amounts they pay or pass on to the doctors and other practitioners who work there.

The Thomas and Naaz case

Thomas and Naaz Pty Ltd ran medical centres in western Sydney. Its doctors bulk billed and paid it 30% of their billings: in most cases its staff claimed the Medicare benefits, received them into its account and paid 70% on to each doctor. The NSW Civil and Administrative Tribunal (NCAT) held the doctor agreements were relevant contracts and the 70% payments were wages, NCAT's Appeal Panel dismissed an appeal, and the Court of Appeal dismissed an application for leave to appeal (Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 at [2]–[6], [11], [74]). It made no difference that the money might already have belonged beneficially to the doctors (at [7]).

Revenue NSW's ruling PTA 041

The ruling (issued 11 August 2023, effective from 1 July 2018) covers medical centres and similar dental, physiotherapy and radiology practices. In its view, a contract is a relevant contract if the centre gives the public access to medical services and engages a practitioner to serve patients on its behalf, and no exemption applies. The practitioner then supplies services to the centre as well as to the patient. Under the ruling:

• Tenancies. A genuine lease or licence of a specific room, where the practitioner runs an independent practice (own patients, advertising, appointments, records and Medicare claims), isn't a relevant contract. A "tenancy" where the practitioner in substance serves the centre's patients is more likely to be one.
• Service fee models. Paying practitioners a share of fees or assigned Medicare benefits can still be paying wages (see also Thomas and Naaz at [7]).
• Practitioner companies and trusts. Contracting through these doesn't by itself avoid the rules: payments to the entity can still be wages.
• Public generally. Seeing patients at one centre, or at centres in the same group, may not be enough.

The GP exemption and rebate

Special rules apply to GPs contracting with medical centres (Sch 2 Div 2A):

• Before 4 September 2024. Relevant GP wages paid or payable before that day are exempt, unless payroll tax was already paid on them before it. The bulk billing test doesn't apply for this purpose (Sch 2 cl 10D).
• From 4 September 2024. The centre is entitled to a rebate of the payroll tax on relevant GP wages if at least 80% (in Metropolitan Sydney) or 70% (elsewhere) of all GP services through the centre in the financial year are bulk billed or under approved veterans' arrangements (Sch 2 cl 10B, 10C).

Relevant GP wages are payments to a GP registered in the specialty of general practice, under a relevant contract that is part of a practice arrangement, for GP services through a medical centre (Sch 2 cl 10A, 10B). Dentists, physiotherapists and other non-GP practitioners aren't covered, and other states' rules differ.

Revenue NSW's guidance (its Bulk Billing Support Initiative page and practice note CPN 036v2) says the centre must be registered for payroll tax and claims the rebate in its monthly and annual returns, which reduces the tax payable. It tests the bulk billing proportion at each medical centre location. A centre that claims the rebate in some months but misses the proportion for the full year loses it for that year in the annual return. Keep records that support the calculation.

Employment agencies and labour hire

A contract under which an agent procures a worker's services for a client is an "employment agency contract" (unless it makes the worker the client's employee). It is dealt with under Division 8, not as a relevant contract (ss 32(3), 37). The agent is taken to be the employer and the worker its employee, and amounts paid to or in relation to the worker for the services, including benefits and super, are the agent's wages (ss 38–40). Once the agent pays, others in the arrangement generally aren't liable (s 41).

The s 32(2) exemptions don't apply. The main carve-out is where the wages would generally have been exempt had the worker been the client's own employee, and the client gives the agent a declaration in the approved form (s 40(2); for workers who are the agent's own employees, Sch 2 cl 13B). The Chief Commissioner can disregard an agency contract that reduces or avoids payroll tax (s 42).

What happens in a Revenue NSW payroll tax audit?

Revenue NSW can require information, records or attendance by written notice (Taxation Administration Act 1996 (NSW) (NSW TAA) s 72).

• How far back. A reassessment generally can't be made more than 5 years after the initial assessment, but there are exceptions, including where the relevant facts weren't fully and truly disclosed (NSW TAA s 9(3)). For payroll tax, an assessment is taken to be made when Revenue NSW calculates the tax from your return (NSW TAA s 8(3)). If you never registered or lodged returns, there may be no initial assessment, and so no 5-year limit.
• Penalty tax. Generally 25% of the unpaid tax (50% for a significant global entity). It can be increased to 75% for intentional disregard of the law, or be nil if you took reasonable care (NSW TAA s 27). A written voluntary disclosure generally reduces it by 80% if made before you're told of an investigation, or by 20% if made during it (ss 28, 29).

Interest also runs on unpaid tax. On asking for either to be remitted, see Revenue NSW disputes, penalty tax and interest.

How do you object to a payroll tax assessment?

1. Lodge within 60 days after the notice of assessment is served (NSW TAA s 89). A late objection needs Revenue NSW's permission, must explain the delay in writing, and can't be lodged more than 5 years after the notice of the initial assessment was served (s 90).
2. State the grounds fully and in detail (NSW TAA s 87). You carry the onus of proof (s 88), so include the contracts and the evidence for each exemption.
3. Deal with payment. An objection doesn't stop recovery of the tax (s 94).
4. Seek review if needed. If the objection fails, you can apply to NCAT or the Supreme Court (not both), generally within 60 days after the notice of determination issues (ss 96, 97, 99). If the objection isn't decided within 90 days, not counting any suspension, you can apply after giving Revenue NSW at least 14 days' written notice (ss 96(1)(b), 99(2), 100(1)).

ATO disputes about the same workers, such as superannuation guarantee, follow different federal rules. See ATO objections.

How we help

• Review the arrangement. We test each exemption against your contracts and evidence, year by year.
• Audits, objections and review. We respond to Revenue NSW notices, prepare objections and act in NCAT and Supreme Court reviews.
• Work with your accountant, who usually holds the payment and day-count records. See how we work with accountants.

Next step

Send us your contractor or service agreements, a list of contractors showing what each was paid and how many days each worked in each financial year, and evidence of their other work. If Revenue NSW has written to you, include every letter and notice of assessment and the date each was served. In a short first call we'll tell you where the risk sits, which exemptions are worth testing and how long you have to act.